CLA-2 RR:CR:TE 964960 SK
TARIFF NO.’s: 9404.90.8020; 9404.90.8522; 9801.00.20
Mr. Kenneth R. Paley
Sharretts, Paley, Carter & Blauvelt, P.C.
Seventy Five Broad Street
New York, N.Y. 10004
RE: Classification; comforter set (Bed-in-a-Bag set); GRI 3(b); 9404.90, HTSUS; NAFTA; General Note 12; country of origin for marking purposes; 19 CFR 102.21(d); Sets; 19 CFR 102.21 (c)(1); Wholly Obtained or Produced in a Single Country; 19 CFR 102.19(a); NAFTA Preference Override; CITA Directive Concerning Visa and Quota Reporting for Textiles and Textile Products Entered as Sets (67 FR 12977); Duty-free treatment for articles previously imported; 9801.00.20, HTSUS; CITA Directive Amending Visa and Quota Requirements for Goods Re-Imported Under 9801.00.20 (59 FR 14392 (3/28/94)).
Dear Mr. Paley:
This is in response to your letter dated February 26, 2001, on behalf of your client, Haywin Textile Trading, Inc., concerning the tariff classification, North American Free Trade Agreement (NAFTA) preference eligibility, country of origin marking requirements, and quota/visa requirements, for a comforter set which will be imported into the United States. You also inquire as to whether certain components of the set are classifiable under subheading 9801.00.20, Harmonized Tariff Schedule of the United States (HTSUS), and thereby eligible for duty free entry upon re-importation of these items into the United States.
No samples were submitted to Customs in conjunction with this ruling request.
FACTS:
The subject merchandise consists of a comforter set commercially marketed as a “Bed-in-a-Bag” set. The set consists of a flat sheet, a fitted sheet, one or two pillow cases, a comforter, a dust ruffle (“bed skirt”), and one or two pillow shams. The sheets and pillow cases are made from a blend of either 55 percent cotton and 45 percent polyester, or 70 percent polyester and 30 percent cotton. The comforter, dust ruffle and pillow shams are made from either 100 percent cotton or a blend of 60 percent polyester and 40 percent cotton. None of the comforters contain any embroidery, lace, braid, edging, trimming, piping or applique work.
The comforters, dust ruffles and pillow shams will be produced in Mexico. The sheets and pillowcases are produced and packaged for retail sale in Pakistan. The sheets and pillowcases are entered for consumption into the United States from Pakistan, duty-paid. The sheets and pillowcases are then exported to Mexico where they are packaged together with the comforters, dust ruffles and pillow shams to make the complete “Bed-in-a-Bag” sets. The sets will then be shipped to the United States.
It is noted that the sheets and pillowcases are imported into the United States from Pakistan by Haywin Textile Trading, Inc. (Haywin). The sheets and pillowcases are subsequently exported from the United States to Mexico and then re-imported back into the United States by Haywin. Haywin’s relationship with the Mexican plant where the comforter, dust ruffles and pillow shams are produced, and where these items are packaged together with the sheets and pillowcases to complete the comforter sets, is one of bailor to bailee as it pertains to the delivery and return of the sheets and pillowcases. Haywin maintains ownership of the sheets and pillowcases throughout the entire time they are in Mexico.
ISSUES:
How is the comforter set classified under the HTSUS?
Is the comforter set eligible for preferential treatment under the NAFTA?
What is the country of origin of the comforter set for marking purposes?
What are the visa/quota restrictions applicable to the subject merchandise?
Are the sheets and pillowcases eligible for duty-free treatment and exemption from quota/visa requirements under subheading 9801.00.20, HTSUS?
What are the country of origin marking requirements for the sheets and pillow cases if entered under subheading 9801.00.20, HTSUS?
LAW AND ANALYSIS:
I. Classification
Classification of merchandise under the HTSUS is in accordance with the General Rules of Interpretation (GRI), taken in order. GRI 1 provides that classification shall be determined according to the terms of the headings and any relative section or chapter notes.
The comforter is classifiable under heading 9404, HTSUS. The sheets and pillowcases are classifiable under heading 6302, HTSUS. The dust ruffle is classifiable under heading 6303, HTSUS. The pillow shams are classifiable under heading 6304, HTSUS. Since classification of the submitted merchandise under a single heading cannot be determined by applying GRI 1, we must apply the other GRI.
GRI 3 provides for goods that are, prima facie, classifiable in two or more headings. GRI 3(b) provides that goods put up in sets for retail sale shall be classified as if they consisted of the material or component that gives them their essential character. According to the Harmonized Commodity Description and Coding System Explanatory Notes, the official interpretation of the Harmonized System at the international level, "goods put up in sets for retail sale" refers to goods which:
Consist of at least two different articles which are, prima facie, classifiable in different headings;
Consist of products or articles put up together to meet a particular need or carry out a specific activity; and
Are put up in a manner suitable for sale directly to users without repacking.
The submitted set meets the qualifications of "goods put up in sets for retail sale." The components of the set consist of different articles that are, prima facie, classifiable in different headings. They are put up together to carry out the specific activity of furnishing a bed and they are packaged for sale directly to users without repacking. Customs has previously held that the comforter is the component that gives a comforter set its essential character. See Headquarters Ruling Letter (HQ) 959813, dated April 10, 1998.
Therefore, when the comforter is made from 100% cotton fabric, the comforter set is classifiable under subheading 9404.90.8020, HTSUS, which provides for “[m]attress supports; articles of bedding and similar furnishing (for example, mattresses, quilts, eiderdowns, cushions, pouffes and pillows) fitted with springs or stuffed or internally fitted with any material or of cellular rubber or plastics, whether or not covered: Other: Other: Of cotton, not containing any embroidery, lace, braid, edging, trimming, piping exceeding 6.35 mm or applique work, quilts, eiderdowns, comforters and similar articles. When the comforter is of chief weight polyester fabric, the applicable subheading for the bedding set is 9404.90.8522, HTSUS, which provides for: “[m]attress supports; articles of bedding and similar furnishing (for example, mattresses, quilts, eiderdowns, cushions, pouffes and pillows) fitted with springs or stuffed or internally fitted with any material or of cellular rubber or plastics, whether or not covered: Other: Other: Other: Quilts, eiderdowns, comforters and similar articles, with outer shell of man-made fibers.
II. NAFTA Eligibility/Originating Status
The comforter, dust ruffle and pillow shams are produced in Mexico. It is also in Mexico that these items are packaged with sheets and pillowcases to form the comforter set. Thus, the subject comforter set undergoes processing operations in Mexico which is a country provided for under the North American Free Trade Agreement (NAFTA).
General Note 12, HTSUS, incorporates Article 401 of NAFTA into the HTSUSA. General Note 12(a) provides, in pertinent part:
* * *
(ii) Goods that originate in the territory of a NAFTA party under subdivision (b) of this note and that qualify to be marked as goods of Mexico under the terms of the marking rules set forth in regulations issued by the Secretary of Treasury (whether or not the goods are marked), when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the “Special” subcolumn followed by the symbol “MX” in parentheses, are eligible for such duty rate, in accordance with section 201 of the North American Free Trade Agreement Implementation Act.
Accordingly, the comforter set at issue will be eligible for the “Special” “MX” rate of duty provided it is a NAFTA “originating” good under General Note 12(b), HTSUS, and it qualifies to be marked as a good of Mexico.
With respect to the “originating” requirement, General Note 12(b) provides
in pertinent part:
For the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as “goods originating in the territory of a NAFTA party” only if --
they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or
they have been transformed in the territory of Canada, Mexico and/or the United States so that –
except as provided in subsection (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein, or,
* * *
As you advise that the comforter, dust ruffle and pillow shams will be produced entirely in Mexico, they are deemed “goods originating” in Mexico as per General Note 12(b)(i).
The question next arises as to whether all of the items in the set must meet the terms of General Note 12(b) or, in the alternative, whether the fact that the article which imparts the essential character to the set (i.e., the comforter) is deemed originating in Mexico suffices to make the entire set originating for purposes of NAFTA eligibility. Customs has consistently held that all the items in the set must meet the terms of General Note 12(b). See HQ 956970, dated December 12, 1994; HQ 559421, dated September 16, 1996; HQ 560081, dated March 13, 1997; HQ 560577, dated August 4, 1997; HQ 560456, dated September 26, 1997; HQ 560992, dated July 6, 1998; and HQ 561326, dated April 26, 1999. These determinations are consistent with the NAFTA that explicitly requires that each of the non-originating materials used in the production of the good undergo the applicable change in tariff classification.
Therefore, Customs must ascertain whether the non-originating materials at issue (i.e., sheets and pillowcases) are transformed in Mexico pursuant to General Note 12(b)(ii)(A). To qualify under this provision, the non-originating materials must undergo the change in tariff classification set forth in General Note 12(t), HTSUS. The comforter sets, depending on fiber content, are classifiable either under subheading 9404.90.8020, HTSUS, or under 9404.90.8522, HTSUS. The applicable NAFTA rule of origin for subheading 9404.90, HTSUS, provides:
A change to subheading 9404.90 from any other chapter, except from heading 5007, 5111 through 5113, 5208
through 5212, 5309 through 5311, 5407 through 5408
or 5512 through 5516.
The non-originating sheets and pillowcases are classified under heading 6302, HTSUS, when they leave Pakistan. As heading 6302, HTSUS, is not excepted by subdivision (t), the non-originating materials undergo the requisite change in tariff classification.
The fact that the sheets and pillowcases are merely packaged together with the originating comforter, dust ruffle and pillow shams as a set in Mexico does not disqualify the set from being considered an originating good. This issue has been addressed in HQ 561326, dated April 26, 1999. In comparing the NAFTA to the United States-Canada Free-Trade Agreement and 19 CFR 102.17, Customs explained that there is no language in General Note 12, HTSUSA, which would disqualify a good from obtaining originating status by virtue of merely having undergone simple packaging or combining operations. Thus, non-originating items may undergo the requisite tariff shift under General Note 12(t), HTSUS, when packaged in Mexico with NAFTA originating items.
Based on the foregoing analysis, the comforter set qualifies as an originating good. Accordingly, the comforter set will be entitled to the special “MX” rate of duty if the comforter set qualifies to be marked as a good of Mexico and if the comforter set is entered into the United States under a HTSUS subheading for which a rate of duty appears in the “Special” subcolumn followed by the symbol “MX” in parentheses.
III. Country of Origin/NAFTA Marking Rules
On December 8, 1994, the President signed into law the Uruguay Round Agreements Act. Section 334 of that Act (codified at 19 U.S.C. 3592) provides new rules of origin for textiles and apparel entered, or withdrawn from warehouse, for consumption, on and after July 1, 1996. On September 5, 1995, Customs published § 102.21 (19 CFR 102.21) in the Federal Register, implementing section 334 (60 FR 46188). Thus, effective July 1, 1996, the country of origin of a textile or apparel product shall be determined by sequential application of the general rules set forth in paragraphs (c)(1) through (5) of § 102.21.
Additionally, § 102.21(d) addresses the treatment of sets for country of origin purposes. Section 102.21(d) provides the following:
Where a good classifiable in the HTSUS as a set includes one or more components that are textile or apparel products and a single country of origin for all of the components of
the set cannot be determined under paragraph (c) of this section, the country of origin of each component of the set that is a textile or apparel product shall be determined separately under paragraph (c) of this section.
Thus, although the classification and NAFTA originating status of the comforter set is based on the comforter, per the terms of § 102.21(d) the country of origin of each item in the set must be determined separately if there is not a single country of origin for all the components in the set as determined under
§ 102.21(c).
Section 102.21(c)(1) provides that “[t]he country of origin of a textile or apparel product is the single country, territory, or insular possession in which the good was wholly obtained or produced.” As the comforter, dust ruffle and pillow shams were wholly obtained or produced in Mexico, their country of origin is Mexico. The sheets and pillowcases were wholly obtained or produced in Pakistan; therefore, it would initially appear that the country of origin for these articles is Pakistan.
However, § 102.19(a) (19 CFR 102.19(a)) provides for a NAFTA override and states as follows:
Except in the case of goods covered by paragraph (b) of this section, if a good which is originating within the meaning of
§ 181.1(q) of this chapter is not determined under
§ 102.11(a) or (b) or § 102.21 to be a good of a single NAFTA country, the country of origin of such good is the last NAFTA country in which that good underwent production other than minor processing, provided that a Certificate of Origin (see § 181.11 of this chapter) has been completed and signed for the good.
The question next arises as to whether the NAFTA override entitles all the items in the bedding set to be marked “MX” as a result of the packaging operations that take place there. Since we have previously determined that the items in the set are “originating” for purposes of the NAFTA preference rule applicable to the set, it is Customs view that § 102.19(a) operates as an override for all the items in the set and all the items are entitled to be marked “MX”. Although packing is considered a non-qualifying operation under § 102.17 (19 CFR 102.17), the production of the comforter, dust ruffle and pillow shams in Mexico meets the requirement that the good underwent production other than minor processing. Customs has previously stated that as long as one item in the set undergoes production other than minor processing, the remaining items in the set will receive the benefit of the NAFTA override. See HQ 559421, dated September 16, 1996; HQ 560577, dated August 4, 1997; HQ 560456, dated September 26, 1997; and HQ 560992, dated July 6, 1998. Thus, each item in the set qualifies to be marked “MX”.
As each item in the comforter set has been found to be originating and qualifies to be marked “MX”, the comforter set is entitled to the special “MX” duty rate, provided that all other requirements of the NAFTA are met.
Pursuant to the analysis set forth above, the sheets and pillowcases, wholly produced in Pakistan and merely packaged with the comforter, dust ruffle and pillow shams in Mexico, would not be subject to quota and visa requirements. However, the Committee for the Implementation of Textile Agreements (CITA) has directed Customs to apply applicable quota and visa requirements to textiles and textile products that are classified as components of a set. See 54 FR 35223, dated August 24, 1989, clarifying 53 FR 52765, dated December 29, 1988. CITA recently reconfirmed the previous directive concerning the applicability of visa requirements and quota reporting of textiles and textile products entered as parts of sets under GRI 3 of the HTSUSA. See 67 FR 12977, dated March 20, 2002. The directive states in pertinent part:
…all applicable visa and quota requirements will apply for textiles and their products which are classified as parts of a set. The rule applies to all items which, if imported separately, would have required a visa and the reporting of quota.
Customs recognizes that section 204 of the Agricultural Act of 1956, as amended (7 U.S.C. 1854), authorizes the President to limit the importation into the United States of any textiles or textile products and that the authority to supervise and implement all textiles agreements and arrangements negotiated pursuant to 7 U.S.C. 1854 has been delegated to CITA. See Executive Order 11651, 37 FR 4699, dated March 4, 1972.
If the comforter, dust ruffle and pillow shams had been imported separately, they would have qualified as originating goods eligible to be marked “MX” by operation of the NAFTA override of § 102.19(a). Thus, the country of origin for the comforter, dust ruffle and pillow shams is Mexico for duty, marking and quota/visa purposes. However, if the sheets and pillowcases had been imported separately they would not have qualified as originating goods and would not receive the benefit of the NAFTA override. Thus, the country of origin of the sheets and pillowcases for duty and marking purposes is Mexico, but the country of origin for quota/visa purposes is Pakistan.
V. Eligibility of sheets and pillow cases for duty-free treatment and exemption from quota/visa requirements under subheading 9801.00.20, HTSUS
Subheading 9801.00.20, HTSUS, provides for duty-free treatment for:
[a]rticles, previously imported, with respect to which the duty was paid upon such previous importation … if (1) reimported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, after having been exported under lease or similar use agreements, and (2) reimported by or for the account of the person who imported it into, and exported it from, the United States.
It is proposed that the sheets and pillowcases will be imported into the United States, duty-paid, by Haywin. Haywin will then export these items to Mexico where they will be packaged together with the remaining items comprising the comforter set. The comforter set will then be re-imported into the United States by Haywin. Based on the foregoing, Haywin meets the requirement set forth in subheading 9801.00.20, HTSUS, that the original importation, subsequent exportation, and final re-importation be by or for the account of the same party (Haywin).
With regard to the issue of whether a packaging operation advances the value or improves the condition of exported goods in the context of subheading 9801.00.20, HTSUS, it is noted that Customs has previously addressed this question. See HQ 560511 dated November 18, 1997. In that ruling, Customs held that certain previously imported bibs that were exported from the United States to the Dominican Republic, where they were to be retail packed with one-piece infants’ wear and returned to the United States, qualified for entry under subheading 9801.00.20, HTSUS. Customs stated that it “does not consider merely packaging a good for retail sale as an advancement in value or improvement in condition.” Similarly, the mere packaging of the Pakistan-origin sheets and pillow cases with the comforters, dust ruffles and pillow shams into Bed-in-a-Bag sets will not render the sheets and pillow cases to have been advanced in value or improved in condition for purposes of subheading 9801.00.20, HTSUS.
The next issue is whether the bailment arrangement under which the subject goods are exported is deemed a lease or similar use agreement as per the terms of 9801.00.20, HTSUS. Customs has consistently regarded bailments to be “similar use agreements” as required by subheading 9801.00.20, HTSUS. See HQ 546561, dated March 16, 1998; HQ 560511, dated November 18, 1997, and; HQ 222863, dated July 1, 1991.
Based on the foregoing analysis, the subject sheets and pillowcases are eligible for duty free entry into the United States under subheading 9801.00.20, HTSUS. On March 22, 1994, CITA issued a directive to the Commissioner of Customs which provided, in part, that effective March 25, 1994, textile and apparel products imported under subheadings 9801.00.20 or 9801.00.25, HTSUS, were no longer subject to visa or quota requirements. See 59 FR 14392 (March 28, 1994). See also HQ 560827 (dated February 25,1998). Accordingly, if entered under HTSUS subheading 9801.00.20, the subject sheets and pillowcases are not subject to quota/visa requirements.
It is noted, however, that HTSUS subheading 9801.00.20 does not have a “MX” symbol appearing in the “Special” subcolumn adjacent to the tariff provision. Accordingly, if the subject sheets and pillowcases are entered into the United States under subheading 9801.00.20, HTSUS, and thus are separately classified from the remainder of the set, the sheets and pillowcases will not be eligible for the NAFTA duty preference, nor will they be eligible to be marked as products of Mexico.
Regarding the country of origin of the sheets and pillowcases if entered
under subheading 9801.00.20, HTSUS, the origin of these items shall be determined, as noted above, by sequential application of the general rules set forth in paragraphs (c)(1) through (5) of § 102.21. Section 102.21(c)(1) provides that “[t]he country of origin of a textile or apparel product is the single country, territory, or insular possession in which the good was wholly obtained or produced.” As the sheets and pillowcases were wholly obtained or produced in Pakistan, they are deemed products of Pakistan for marking purposes if entered under subheading 9801.00.20, HTSUS.
HOLDING:
Where All Items in the Comforter Set Are Entered into the United States under Subheading 9404.90, HTSUS
The subject “Bed-in-a-Bag” set is classifiable, based on the comforter, in either subheading 9404.90.8020, HTSUSA, which provides for comforters of cotton, or in subheading 9404.90.8522, HTSUSA, which provides for comforters with an outer shell of man-made fibers.
By virtue of the comforter, dust ruffle and pillow shams being produced entirely in Mexico, and the sheets and pillowcases meeting the applicable tariff shift rule, all the components in the “Bed-in-a-Bag” set will be deemed originating for NAFTA purposes if entered into the United States under either HTSUS subheading 9404.90.8020 or 9404.90.8522.
By virtue of the NAFTA override, each bedding item, if entered as a set under either HTSUS subheading 9404.90.8020 or 9404.90.8522, must be marked country of origin Mexico in order to receive preferential treatment under the NAFTA as claimed. If entered as a set under either HTSUS subheading 9404.90.8020 or 9404.90.8522, all of the items are entitled to the NAFTA “MX” special duty rate.
The sheets and pillowcases are subject to quota and visa requirements in that Pakistan is the country of origin for quota/visa purposes. The applicable textile category code for sheets of cotton is 361 and for pillowcases of cotton is 360. The applicable textile category code for the sheets and pillowcases of chief weight polyester is 666.
The designated textile and apparel category may be subdivided into parts. If so, visa and quota requirements applicable to the subject merchandise may be affected. Since part categories are the result of international bilateral agreements which are subject to frequent renegotiations and changes, to obtain the most current information available, we suggest that you check, close to the time of shipment, the Status Report on Current Import Quotas (Restraint Levels), an internal issuance of the U.S. Customs Service, which is available for inspection at your local Customs office. The Status Report on Current Import Quota (Restraint Levels) is also available on the Customs Electronic Bulletin Board (CEBB) which can be found on the U.S. Customs Service Website at www.customs.treas.gov.
Due to the changeable nature of the statistical annotation (the ninth and tenth digits of the classification) and the restraint (quota/visa) categories applicable to textile merchandise, you should contact your local Customs office prior to importation of this merchandise to determine the current status of any import restraints or requirements.
Where Sheets and Pillowcases Are Entered into the United States Under Subheading 9801.00.20, HTSUS
The sheets and pillowcases are eligible for entry as articles previously imported under subheading 9801.00.20, HTSUS, which accords duty-free entry. If entered under subheading 9801.00.20, HTSUS, the sheets and pillowcases must be marked as products of Pakistan and are exempt from quota/visa requirements.
The holding set forth above applies only to the specific factual situation and merchandise identified in the ruling request. This position is clearly set forth in § 181.100(a)(2) (19 CFR 181.100(a)(2)). This section states that a ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect.
This ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 CFR 181). Should it be subsequently determined that the information furnished is not complete and does not comply with 19 CFR 181.100(a)(2), the ruling will be subject to modification or revocation. In the event there is a change in the facts previously furnished, this may affect the determination of country of origin. Accordingly, if there is any change in the facts submitted to Customs, it is recommended that a new ruling request be submitted.
Sincerely,
Myles B. Harmon, Acting Director
Commercial Rulings Division